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annual report 2011

Tongala & District Community Bank® Branch

Tongala & District Financial Services Limited

ABN 22 094 331 665

Annual report Tongala & District Financial Services Limited 1

Chairman’s report 2-3

Manager’s report 4

Bendigo and Adelaide Bank Ltd report 5-6

Directors’ report 7-10

Financial statements 11-14

Notes to the financial statements 15-29

Directors' declaration 30

Independent audit report 31-32

BSX report 33-34

Contents

Annual report Tongala & District Financial Services Limited2

For year ending 30 June 2011

As I write my first report, I would like to start by thanking Richard Herbert for the fantastic job he has done in

getting a Community Bank® branch established in our town and leading the Company through its first ten years

of banking. He along with his Board has seen the business grow to what it is today and something we can all be

very proud of.

With our tenth birthday celebrations behind us it is an interesting time to be leading Tongala & District Financial

Services and it gives me great pleasure to present this annual report. We are at a very exciting stage of the

Company’s life and the recent strong growth presents great opportunities for further investment into the local

community, building on the significant contributions that have already been made. This year we have continued

to support many local groups and organisations including the bowls club, junior football club, swimming club,

primary schools and contributed to Power Country FM to assist them with the purchase of a new outside

broadcast van.

The recent addition of the Kyabram agency presents us with the ability to promote the benefits of the Community

Bank® model to a larger audience and the Board and I look forward to being able to contribute to the growth of

that town as their support for our business grows. The agencies location in Allan St together with the soon to be

installed ATM will help raise the profile and provide a better service to all customers.

We continue to work closely with the Mathoura agency and look forward to this part of our business growing. Like

our local area the Mathoura district has been impacted by the prolonged drought however the recent return of

seasonal rainfall augurs well for the future.

Restoring the balance

In February, members of our Board meet with senior staff and Executives from Bendigo and Adelaide Bank Ltd to

hear about the findings of a review it conducted of the Community Bank® financial model.

The review examined how the model has performed since its inception in 1998 and reaffirmed the success,

strength and potential of the banking initiative. It also assessed how relevant the mechanics of the model are

given all the structural change that has occurred over time, including the impact of the Global Financial Crisis.

The internal review, conducted with the oversight of a representative board of Australia’s 270 Community Bank®

branches concluded:

• The model, in which communities own and operate franchised Bendigo Bank branches, had assisted

communities achieve the broad range of outcomes they sought to achieve by partnering with the bank. These

range from simply returning banking services to the community, through to actively building the community’s

balance sheet by aggregating the banking business within a community.

• The fundamental principles on which the Community Bank® model was established were sound and

relevant – including equal responsibility and equal income share for the bank and each of its partners.

• There are impacts on the revenue mechanisms as a result of structural changes in the industry but, in the

main, the model has stood up well to the stresses imposed by the GFC.

However, while the GFC had no impact on the responsibilities of each of the partners in the Community Bank®

branch network, it did result in a lasting change to margins on two core banking products (fixed rate home loans

and term deposits greater than 90 days).

Chairman’s report


Chairman’s report continued This has resulted in the income share being tilted in favour of us, the community partners, and following

discussions with the Community Bank® Strategic Advisory Board, and an independent review of the income

sharing arrangements, we are moving to restore the income share back to the 50/50 principle which has always

underpinned the model.

This means some commission payments to Community Bank® Companies, including our own, were reduced

from 1 April 2011, in an effort to rebalance the income over the next two years.

The alteration will have no impact on our customers and an insignificant effect on our Company as we have a plan

to meet growth targets which will counter any reduction in commissions earned on these two products.

Addressing the imbalance places both our Community Bank® Company and the Bank, in the best possible

position to maintain development. By successfully addressing this issue together with our partner, we will all be

in a better position to grow our joint businesses.

Fairfax article

In May, the Fairfax group published an article on Bendigo and Adelaide Bank Ltd’s Community Bank® model. We

believe the article to be dishonest by omission with a lack of balance.

In particular the assertion that “legions of shareholders” are unhappy. The bank has had less than 20 complaints

in 11 years and there are more than 67,000 shareholders, so that is a miniscule 0.03 percent.

Capital is raised to establish the business and it is meant to be drawn down. Technically, once the business is

trading at a consistent profit it doesn’t need capital. This usually takes about four years.

There are more than 61 branches four years of age or younger that are not expected to be making a profit yet. In

reality there are only 48 branches in that position.

Bendigo and Adelaide Bank Ltd released a comprehensive study of the entire Community Bank® branch network

to the ASX on Friday 6 May. The data is available on the ASX website and is an open and honest account of the

network’s performance.

It shows a very robust business model that is making significant contributions to the prosperity of the

communities in which the Community Bank® Companies operate and is a great reflection of what can be

achieved through our partnerships.

Ben and the team in the branch have done a great job and continue to provide exceptional customer service. They

justly deserve the many compliments they receive from customers and I thank them all.

Yours sincerely

Neil Pankhurst

Chairman



The Tongala & District Community Bank® Branch achieved a significant milestone throughout the financial year

when it reached $50 million in business with total business now sitting at $57 million. This was a significant

milestone and through the continued support of our community we look forward to further growth of our

business.

Over the past 10 years the Tongala & District Community Bank® Branch has contributed over $300,000 to our

local community through sponsorships, donations and grants. It is very rewarding to make such a contribution

to our community. The Community Bank® message is simple, the more banking done locally, the more profit

generated and therefore a larger contribution can be passed on to the community.

Once again we have been active in the community during the last 12 months with several contributions made to

local organisations. We look forward to being able to assist further projects in our community and your support

will enhance our ability to distribute further funds in our local community.

Earlier this year Tongala & District Community Bank® Branch became aligned with the Bendigo Bank Agency

in Kyabram. This connection now means we can provide a strong banking presence in Kyabram and provide a

service to new and existing Kyabram based customers. We also have an Agency based in Mathoura so our scope

to attract more banking business is not just limited to the Tongala region.

I would like to take this opportunity to thank the staff and Board for their support and efforts throughout the last

12 months. As a team we are looking to build our business by developing strong relationships with our customers

through our full range of banking products.

Ben Langley

Branch Manager

Manager’s report


Bendigo and Adelaide Bank Ltd report


As Community Bank® shareholders you are part of something special, a unique banking movement which has

evolved into a whole new way of thinking about organising and strengthening community.

Together, we have reached new heights and achieved many great successes, all of which has been underpinned

by our commitment and dedication to the communities we’re a part of.

Together we’re making extraordinary progress, with more than $58.25 million returned to support community

groups and endeavours since the network was established in 1998.

The returns grow exponentially each year, with $469 thousand returned within the first five years, $8.15 million

within the first eight and $22.58 million by the end of the first decade of operation. Based on this, we can predict

the community returns should top $100 million within the next three years, which equates to new community

facilities, better health care, increased transport services and generally speaking, more prosperous communities.

Together, we haven’t just returned $58.25 million; there is also the flow on economic impact to consider. Bendigo

and Adelaide Bank is in the process of establishing an evidential basis that captures the complete picture and

the economic outcomes these initiatives generate. However, the tangible outcomes are obvious. We see it in

tenanted shops, increased consumer traffic, retained local capital and new jobs but we know that there are

broader elements of community strength beyond the economic indicators, which demonstrate the power of our

community models.

It is now evident that branches go through a clear maturity phase, building customer support, generating

surpluses and establishing a sustainable income stream. This enables Boards to focus less on generating

business and more on the community’s aspirations. Bendigo is facilitating this through Director engagement

and education, community consultations and other community solutions (Community Enterprise Foundation™,

Community Sector Banking, Community Telco, Generation Green™ and Community Enterprises) that will provide

Boards with further development options.

In Bendigo, your Community Bank® Board has a committed and successful partner. Our past efforts and

continued commitment to be Australia’s leading customer-connected bank, that is relevant, connected and

valued, is starting to attract attention and reap rewards.

In January, a Roy Morgan survey into customer satisfaction saw Bendigo Bank achieve an industry leading

score among Australian retail banks. This was the first time Bendigo Bank has led the overall results since

August 2009.

In May, Fitch Ratings upgraded Bendigo and Adelaide Banks Long-Term Issuer Default Rating (IDR) to A- from

BBB+. This announcement saw us become the first Australian bank – and one of the very few banks globally – to

receive an upgrade since the Global Financial Crisis.

Standard & Poor’s revised credit rating soon followed seeing Bendigo and Adelaide Bank shift from BBB+

stable, to BBB+ positive. These announcements reflect the hard and diligent work by all our staff, our sound

risk management practices, low-risk funding and balance sheet structure, sound capital ratios and a sustained

improvement in profitability.

The strength of our business model – based on our commitment to our customers and the communities that we

operate in – is being recognised by all three ratings agencies.


Bendigo and Adelaide Bank Ltd report continued Over the past year the bank has also added more than 700 additional ATMs through a network sharing

agreement with Suncorp Bank, which further enhances our customers’ convenience and expands our footprint

across the country. In addition to this a further 16 Community Bank® branches were opened.

The bank has also had a renewed focus on business banking and re-launched our wealth management services

through Bendigo Wealth, which oversees the Adelaide Bank, Leveraged Equities, Sandhurst Trustees and financial

planning offering.

The Community Bank® model is unique and successful, it’s one of our major points of difference and it enables

us to connect with more than 550,000 customers, in excess of 270 communities and make a difference in the

lives of countless people.

We are very proud of the model we have developed and we’re very thankful for the opportunity to partner with

communities to help build their balance sheets.

We thank you all for the part you play in driving this success.

Russell Jenkins

Executive Customer and Community


For the financial year ended 30 June 2011

Your Directors submit the financial report of the Company for the financial year ended 30 June 2011.

Directors

The names and details of the Company’s Directors who held office during or since the end of the financial year

are:

Neil Pankhurst Richard Herbert

Chairman Director

Farmer Baker

Ken Chapman Ian Johnstone

Director Director

Farmer Retired

Jean Courtney Ammie Grundy (resigned 24 August 2010)

Director Director

Director of Nursing Bank Officer

David Blanchard Jill Regan

Director / Company Secretary Director

Public Accountant Farmer

Ian Taylor Marlene Wallace (resigned 27 July 2010)

Director Director

Retired Retired

Lyn Cosham (appointed 23 November 2010) David Newman (appointed 22 March 2011)

Director Director

Retired Newsagent

Directors were in office for this entire year unless otherwise stated.

Principal activities

The principal activities of the Company during the course of the financial year were in providing Community

Bank® services under management rights to operate a franchised branch of Bendigo and Adelaide Bank Ltd.

There has been no significant changes in the nature of these activities during the year.

Review of operations

The profit/(loss) of the Company for the financial year after provision for income tax was $7,442 (2010:

($35,464)).

Directors’ report


Dividends

No dividends were declared or paid during the year.

Significant changes in the state of affairs

In the opinion of the Directors there were no significant changes in the state of affairs of the Company that

occurred during the financial year under review not otherwise disclosed in this report.

Significant events after the balance date

Since the balance date, world financial markets have shown volatility that may have an impact on investment

earnings in the 2011/12 financial year. The Company continues to maintain a conservative investment strategy

to manage the exposure to market volatility.

There are no other matters or circumstances that have arisen since the end of the financial year that have

significantly affected or may significantly affect the operations of the Company, the results of those operations or

the state of affairs of the Company, in future years.

Likely developments

The Company will continue its policy of providing banking services to the community.

Remuneration report

Other than detailed below, no Director has received or become entitled to receive, during or since the financial

year, a benefit because of a contract made by the Company, controlled entity or related body corporate with

a Director, a firm which a Director is a member or an entity in which a Director has a substantial financial

interest. This statement excludes a benefit included in the aggregate amount of emoluments received or due

and receivable by Directors shown in the Company’s accounts, or the fixed salary of a full-time employee of the

Company, controlled entity or related body corporate.

Director Ian Johnstone was paid $9,600 (2010: $9,527) in rent payments for lease of property for the year

ended 30 June 2011. Company Secretary David Blanchard was paid $9,000 (2010: $12,000) for professional

accounting and secretarial duties for the year ended 30 June 2011. These payments were made under normal

commercial terms and conditions.

Indemnification and insurance of Directors and Officers

The Company has agreed to indemnify each Officer (Director, Secretary or employee) out of assets of the

Company to the relevant extent against any liability incurred by that person arising out of the discharge of their

duties, except where the liability arises out of conduct involving dishonesty, negligence, breach of duty or the lack

of good faith. The Company also has Officers Insurance for the benefit of Officers of the Company against any

liability occurred by the Officer, which includes the Officer’s liability for legal costs, in or arising out of the conduct

of the business of the Company or in or arising out of the discharge of the Officer’s duties.

Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause

of the contract of insurance. The Company has not provided any insurance for an Auditor of the Company or a

related body corporate.

Directors’ report continued



Company Secretary

David Blanchard was appointed the Company Secretary on 5 September 2007. Over the past thirty six years his

occupation has been Public Accountant.

Corporate governance

The Company has implemented various corporate governance practices, which include:

(a) The establishment of an audit committee. Members of the audit committee are David Blanchard, Ian

Johnstone, Ken Chapman, Jill Regan, Jean Courtney and David Newman;

(b) Director approval of operating budgets and monitoring of progress against these budgets;

(c) Ongoing Director training; and

(d) Monthly Director meetings to discuss performance and strategic plans.

Directors’ meetings

The number of Directors’ meetings attended during the year were:

Board

Director meetings #

Number of meetings held

Neil Pankhurst 8 (11)

Richard Herbert 8 (11)

Ian Johnstone 9 (11)

Jean Courtney 8 (11)

David Blanchard 5 (11)

Ken Chapman 8 (11)

Jill Regan 6 (11)

Ian Taylor 5 (11)

Marlene Wallace (resigned 27 July 2010) 1 (1)

Ammie Grundy (resigned 24 August 2010) 0 (2)

Lyn Cosham (appointed 23 November 2010) 6 (7)

David Newman (appointed 22 March 2011) 3 (4)

# The first number is the meetings attended while in brackets is the number of meetings eligible to attend.

Non audit services

Details of amounts paid or payable to the Auditor for non-audit services provided during the financial year by the

Auditor are outlined in note 5 to the financial statements.


Non audit services (continued)

The Directors have considered the non-audit services provided during the year by the Auditor and are satisfied the

provision of these services is compatible with the general standards of independence for Auditors imposed by the

Corporations Act 2001 for the following reasons:

(a) all non audit services have been reviewed to ensure they do not impact the integrity and objectivity of the

Auditor; and

(b) none of the services undermine the general principles relating to Auditor independence as set out in APES

110 Code of Ethics for Professional Accountants as they did not involve reviewing the Auditors own work,

acting in management or decision making capacity for the Company, acting as an advocate for the Company

or jointly sharing risks and rewards.

Auditor Independence Declaration

The Directors received the following declaration from the Auditor of the Company:

Auditor’s Independence Declaration

In relation to our audit of the financial report of Tongala & District Financial Services Limited for

the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been

no contraventions of the Auditor independence requirements of the Corporations Act 2001 or any

applicable code of professional conduct.

Philip Delahunty

Partner

Richmond Sinnott & Delahunty

14 September 2011

Signed in accordance with a resolution of the Board of Directors at Tongala, Victoria on 14 September 2011

David Blanchard, Director


Level 2, 10 -16 Forest StreetPO Box 30

Bendigo. 3552Ph. 03 5443 1177Fax. 03 5444 4344

E-mail: [email protected]


The accompanying notes form part of these financial statements.

Financial statements

Statement of comprehensive income for the year ended 30 June 2011

Note 2011 2010 $ $

Revenue from continuing operations 2 565,312 501,266

Employee benefits expense 3 (280,545) (226,086)

Charitable donations and sponsorship (25,964) (97,634)

Depreciation and amortisation expense 3 (28,066) (30,764)

Finance costs 3 (5,446) (6,228)

Other expenses (217,433) (185,466)

Profit / (loss) before income tax expense / (benefit) 7,858 (44,912)

Income tax expense / (benefit) 4 416 (9,448)

Profit / (loss) after income tax expense / (benefit) 7,442 (35,464)

Other comprehensive income - -

Total comprehensive income 7,442 (35,464)

Earnings per share (cents per share)

- basic for profit / (loss) for the year 23 2.18 (10.39)

- diluted for profit / (loss) for the year 23 2.18 (10.39)



Statement of financial position as at 30 June 2011

Note 2011 2010 $ $

Current assets

Cash and cash equivalents 6 164,222 178,782

Receivables 7 25,704 28,464

Total current assets 189,926 207,246

Non-current assets

Property, plant and equipment 8 13,319 31,989

Deferred tax assets 4 13,861 14,277

Intangible assets 9 45,000 4,396

Total non-current assets 72,180 50,662

Total assets 262,106 257,908

Current liabilities

Payables 10 20,840 20,623

Loans and borrowings 11 15,256 17,071

Provisions 12 33,460 24,062

Total current liabilities 69,556 61,756

Non-current liabilities

Loans and borrowings 11 44,346 55,390

Total non-current liabilities 44,346 55,390

Total liabilities 113,902 117,146

Net assets 148,204 140,762

Equity

Share capital 13 341,350 341,350

Accumulated losses 14 (193,146) (200,588)

Total equity 148,204 140,762

Financial statements continued



Statement of cash flows for the year ended 30 June 2011

Note 2011 2010 $ $

Cash flows from operating activities

Cash receipts in the course of operations 618,343 541,596

Cash payments in the course of operations (570,173) (556,276)

Interest received 5,575 6,007

Interest expense (5,446) (6,228)

Income tax paid - 1,578

Net cash flows from / (used in) operating activities 15b 48,299 (13,323)

Cash flows from investing activities

Purchase of intangible assets (50,000) -

Net cash flows used in investing activities (50,000) -

Cash flows from financing activities

Proceeds from / (repayments of) borrowings (12,859) 49,816

Net cash flows from / (used in) financing activities (12,859) 49,816

Net increase / (decrease) in cash held (14,560) 36,493

Cash and cash equivalents at start of year 178,782 142,289

Cash and cash equivalents at end of year 15a 164,222 178,782




Statement of changes in equity for the year ended 30 June 2011

Note 2011 2010 $ $

Share capital

Balance at start of year 341,350 341,350

Issue of share capital - -

Share issue costs - -

Balance at end of year 341,350 341,350

Accumulated losses

Balance at start of year (200,588) (165,124)

Profit/(loss) after income tax expense 7,442 (35,464)

Dividends paid 22 - -

Balance at end of year (193,146) (200,588)



For year ended 30 June 2011

Note 1. Basis of preparation of the financial report

(a) Basis of preparation

Tongala & District Financial Services Limited (‘the Company’) is domiciled in Australia. The financial statements

for the year ending 30 June 2011 are presented in Australian dollars. The Company was incorporated in Australia

and the principal operations involve providing Community Bank® services.

The financial statements have been prepared on an accruals basis and are based on historical costs and do not

take into account changing money values or, except where stated, current valuations of non-current assets.

The financial statements require judgements, estimates and assumptions to be made that affect the application

of accounting policies. Actual results may differ from these estimates.

The financial statements were authorised for issue by the Directors on 14 September 2011.

(b) Statement of compliance

The financial report is a general purpose financial report, which has been prepared in accordance with Australian

Accounting Standards (including Australian Interpretations) adopted by the Australian Accounting Standards

Board and the Corporations Act 2001. The financial report of the Company complies with International Financial

Reporting Standards and interpretations adopted by the International Accounting Standards Board. Australian

Accounting Standards that have been recently issued or amended, but are not yet effective, have not been

adopted in the preparation of this financial report. These changes are not expected to have a material impact on

the Company’s financial statements.

(c) Significant accounting policies

The following is a summary of the material accounting policies adopted. The accounting policies have been

consistently applied and are consistent with those applied in the 30 June 2010 financial statements.

Income tax

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax

assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which

the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be

utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent

that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred

income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year

when the asset is realised or the liability is settled.

Notes to the financial statements


Notes to the financial statements continued

Note 1. Basis of preparation of the financial report (continued)

Property, plant and equipment

Property, plant and equipment are brought to account at cost less accumulated depreciation and any impairment

in value.

Land and buildings are measured at fair value less accumulated depreciation.

Depreciation is calculated on a straight line basis over the estimated useful life of the asset as follows:

Class of asset Depreciation rate

Plant & equipment 10-20%

Motor vehicles 25%

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in

circumstances indicate the carrying value may not be recoverable.

If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets

or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

Recoverable amount of assets

At each reporting date, the Company assesses whether there is any indication that an asset is impaired. Where

an indicator of impairment exists, the Company makes a formal estimate of the recoverable amount. Where the

carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down

to its recoverable amount.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where

the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is

recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables

or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a

gross basis.

The GST components of cash flows arising from investing and financing activities which are recoverable from, or

payable to, the ATO are classified as operating cash flows.




Employee benefits

The provision for employee benefits to wages, salaries and annual leave represents the amount which the

Company has a present obligation to pay resulting from employees’ services provided up to the reporting date.

The provision has been calculated on undiscounted amounts based on wage and salary rates expected to be paid

and includes related on-costs.

The Company contributes to a defined contribution plan. Contributions to employee superannuation funds are

charged against income as incurred.

Intangibles

Establishment costs have been initially recorded at cost and amortised on a straight line basis at a rate of 20%

per annum.

Cash

Cash on hand and in banks are stated at nominal value.

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in

money market instruments, net of outstanding bank overdrafts.

Revenue

Interest and fee revenue is recognised when earned. All revenue is stated net of the amount of goods and

services tax (GST).

Receivables and payables

Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90

days. Receivables are recognised and carried at original invoice amount less a provision for any uncollected

debts. Liabilities for trade creditors and other amounts are carried at cost that is the fair value of the

consideration to be paid in the future for goods and services received, whether or not billed to the Company.

Loans and borrowings

All loans are measured at the principal amount. Interest is recognised as an expense as it accrues.

Provisions

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a

future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is

probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the

amount of the obligation.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly

recommended on or before the reporting date.

Share capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the

share proceeds received.




Comparative figures

Where required by Accounting Standards comparative figures have been adjusted to conform with changes in

presentation for the current financial year.

2011 2010 $ $

Note 2. Revenue from continuing operationsOperating activities

- services commissions 559,737 495,259

- other revenue - -

559,737 495,259

Non-operating activities:

- interest received 5,575 6,007

- other revenue - -

5,575 6,007

565,312 501,266

Note 3. ExpensesEmployee benefits expense

- wages and salaries 265,029 211,338

- superannuation costs 15,089 14,239

- workers’ compensation costs 427 509

280,545 226,086

Depreciation of non-current assets:

- plant and equipment 15,096 13,066

- motor vehicle 3,574 7,148

Amortisation of non-current assets:

- intangibles 9,396 10,550

28,066 30,764

Finance costs:

- interest paid 5,446 6,228

Bad debts 327 817



2011 2010 $ $

Note 4. Income tax expenseThe prima facie tax on profit/(loss) before income tax is reconciled to the

income tax expense/(benefit) as follows:

Prima facie tax on profit/(loss) before income tax at 30% 2,357 (13,474)

Add tax effect of:

- Non-deductible expenses 4,139 3,850

- Prior year under / (over) provision (6,080) 176

Current income tax expense/(benefit) 416 (9,448)

Income tax expense/(benefit) 416 (9,448)

Deferred tax assets

Future income tax benefits arising from tax losses are recognised

at reporting date as realisation of the benefit is regarded

as probable. 13,861 14,277

Note 5. Auditors’ remunerationAmounts received or due and receivable by Richmond, Sinnott & Delahunty for:

- Audit or review of the financial report of the Company 3,900 3,900

- Preparation and lodgement of taxation return 500 450

- Share registry services 1,600 275

6,000 4,625

Note 6. Cash and cash equivalentsCash assets 164,222 178,782

Note 7. ReceivablesTrade debtors 25,704 28,464



2011 2010 $ $

Note 8. Property, plant and equipmentFurniture & fittings

At cost 65,766 65,766

Less accumulated depreciation (65,766) (59,111)

- 6,655

Plant & equipment

At cost 42,200 42,200


13,319 21,760

Leased motor vehicle

At cost 28,592 28,592


- 3,574

Total written down amount 13,319 31,989

Movements in carrying amounts

Furniture & fittings

Carrying amount at beginning of year 6,655 13,232

Additions - -

Disposals - -

Depreciation expense (6,655) (6,577)

Carrying amount at end of year - 6,655

Plant & equipment


Additions - -

Disposals - -


Carrying amount at end of year 13,319 21,760



2011 2010 $ $

Note 8. Property, plant and equipment (continued)

Leased motor vehicle


Additions - -

Disposals - -


Carrying amount at end of year - 3,574

Note 9. Intangible assetsEstablishment costs

At cost 50,000 52,750

Less accumulated amortisation (5,000) (48,354)

45,000 4,396

Note 10. PayablesTrade creditors 20,840 20,623

Note 11. Loans and borrowingsCurrent

Bank loan 8,724 8,724

Lease liability 6,532 8,347

15,256 17,071

Non-current

Bank loan 43,339 47,831

Lease liability 1,007 7,559

Total non-current 44,346 55,390



2011 2010 $ $

Note 12. ProvisionsEmployee benefits 33,460 24,062

Movement in employee benefits

Opening balance 24,062 21,781

Additional provisions recognised 13,109 7,622

Amounts utilised during the year (3,711) (5,341)

Closing balance 33,460 24,062

Note 13. Share capital341,350 Ordinary Shares fully paid of $1 each 341,350 341,350

Note 14. Accumulated lossesBalance at the beginning of the financial year (200,588) (165,124)

Profit / (loss) after income tax 7,442 (35,464)

Balance at the end of the financial year (193,146) (200,588)

Note 15. Statement of cash flows(a) Cash and cash equivalents

Cash assets 164,222 178,782

(b) Reconciliation of profit / (loss) after tax to net cash provided

from / (used in) operating activities

Profit / (loss) after income tax 7,442 (35,464)

Non cash items

- Depreciation 18,670 20,214

- Amortisation 9,396 10,550



2011 2010 $ $

Note 15. Statement of cash flows (continued)

Changes in assets and liabilities

- (Increase) decrease in receivables 2,760 (2,269)

- Increase (decrease) in income tax payable - 1,754

- Increase (decrease) in payables 217 (765)

- Increase (decrease) in provisions 9,398 2,281

- (Increase) decrease in deferred income tax asset 416 (9,624)

Net cash flows from / (used in) operating activities 48,299 (13,323)

Note 16. Director and related party disclosuresThe names of Directors who have held office during the financial year are:

Neil Pankhurst

Richard Herbert

Ian Johnstone

Jean Courtney

David Blanchard

Ken Chapman

Jill Regan

Ian Taylor

Marlene Wallace (resigned 27 July 2010)

Ammie Grundy (resigned 24 August 2010)

Lyn Cosham (appointed 23 November 2010)

David Newman (appointed 22 March 2011)

Director Ian Johnstone was paid $9,600 (2010: $9,527) in rent payments for lease of property for the year

ended 30 June 2011. Company Secretary David Blanchard was paid $9,000 (2010: $12,000) for professional

accounting and secretarial duties for the year ended 30 June 2011. These payments were made under normal

commercial terms and conditions.

No Directors’ fees have been paid as the positions are held on a voluntary basis.



Note 16. Director and related party disclosures (continued)

Directors’ shareholdings 2011 2010

Neil Pankhurst 1,500 1,500

Richard Herbert 2,000 2,000

Ian Johnstone 5,000 5,000

Jean Courtney 528 528

David Blanchard 1,500 1,500

Ken Chapman 8,000 8,000

Jill Regan 2,000 2,000

Ian Taylor 1,000 1,000

Marlene Wallace (resigned 27 July 2010) - -

Ammie Grundy (resigned 24 August 2010) - -

Lyn Cosham (appointed 23 November 2010) 1,000 1,000

David Newman (appointed 22 March 2011) - -

There was no movement in Directors’ shareholdings during the year. Each share held has a paid up value of

$1 and is fully paid.

Note 17. Subsequent eventsSince the balance date, world financial markets have shown volatility that may have an impact on investment

earnings in the 2011/12 financial year. The Company continues to maintain a conservative investment strategy

to manage the exposure to market volatility.

There have been no other events after the end of the financial year that would materially affect financial

statements.

Note 18. Contingent liabilities and assetsThere were no contingent liabilities or assets at the date of this report to affect the financial statements.

Note 19. Segment reportingThe economic entity operates in the financial services sector where it provides banking services to its clients. The

economic entity operates in one geographic area being Tongala, Victoria.



Note 20. Corporate informationTongala & District Financial Services Limited is a Company limited by shares incorporated in Australia whose

shares are publicly traded on the Bendigo Stock Exchange.

The registered office and principal place of business is:

35 Mangan Street,

Tongala VIC 3621

2011 2010 $ $

Note 21. Lease commitmentsFinance leases are capitalised in the accounts in accordance with the

accounting policies outlined in Note 1.

Payable:

No later than 1 year 6,532 9,380

Later than 1 year & not later than 5 years 1,962 8,430

Later than 5 years - -

Minimum lease payments 8,494 17,810

Less future finance charges (955) (1,904)

7,539 15,906

Note 22. Dividends paid or provided for on ordinary shares(a) Franking credit balance

The amount of franking credits available for the subsequent financial

year are:

- Franking account balance as at the end of the financial year 9,258 9,258

- Franking debits that will arise from the payment of income tax

payable as at the end of the financial year - -

9,258 9,258



2011 2010 $ $

Note 23. Earnings per shareBasic earnings per share amounts are calculated by dividing profit / (loss)

after income tax by the weighted average number of ordinary shares

outstanding during the year.

Diluted earnings per share amounts are calculated by dividing profit / (loss)

after income tax by the weighted average number of ordinary shares

outstanding during the year (adjusted for the effects of any dilutive

options or preference shares).

The following reflects the income and share data used in the basic and

diluted earnings per share computations:

Profit / (loss) after income tax expense 7,442 (35,464)

Weighted average number of ordinary shares for basic and diluted

earnings per share 341,350 341,350

Note 24. Financial risk managementThe Company has exposure to credit risk, liquidity risk and market risk from their use of financial instruments.

This note presents information about the Company’s exposure to each of the above risks, their objectives, policies

and processes for measuring and managing risk, and the management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management

framework. The Board has established an Audit Committee which reports regularly to the Board. The Audit

Committee is assisted in the area of risk management by an internal audit function.

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails

to meet its contractual obligations. For the Company it arises from receivables and cash assets.

The maximum exposure to credit risk at reporting date to recognised financial assets is the carrying amount

of those assets as disclosed in the Statement of Financial Position and notes to the financial statements. The

Company’s maximum exposure to credit risk at reporting date was:

Carrying amount 2011 2010 $ $

Cash assets 164,222 178,782

Receivables 25,704 28,464

189,926 207,246



Note 24. Financial risk management (continued)

(a) Credit risk (continued)

The Company’s exposure to credit risk is limited to Australia by geographic area. The majority of the balance of

receivables are due from Bendigo and Adelaide Bank Ltd.

None of the assets of the Company are past due (2010: nil past due) and based on historic default rates, the

Company believes that no impairment allowance is necessary in respect of assets not past due.

The Company limits its exposure to credit risk by only investing in liquid securities with Bendigo and Adelaide

Bank Ltd.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The

Company ensures it will have enough liquidity to meet its liabilities when due under both normal and stressed

conditions. Liquidity management is carried out within the guidelines set by the Board.

Typically, the Company maintains sufficient cash on hand to meet expected operational expenses, including

the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot

reasonably be predicted, such as natural disasters.

The following are the estimated contractual maturities of financial liabilities, including estimated interest

payments.

Carryingamount

$

Contractualcash flows

$

1 year or less

$

Over 1 to5 years

$

More than5 years

$

30 June 2011

Payables 20,840 (20,840) (20,840) – –

Loans and borrowings 59,602 (78,068) (15,256) (28,134) (34,678)

80,442 (98,908) (36,096) (28,134) (34,678)

30 June 2010

Payables 20,623 (20,623) (20,623) – –

Loans and borrowings 72,461 (96,108) (18,104) (34,602) (43,402)

93,084 (116,731) (38,727) (34,602) (43,402)

(c) Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the Company’s income or

the value of its holdings of financial instruments. The objective of market risk management is to manage and

control market risk exposures within acceptable parameters.




(c) Market risk (continued)

Interest rate risk

Interest rate risk is that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. The Company reviews the exposure to interest rate risk as part of the regular

Board meetings.

Sensitivity analysis

At the reporting date the interest rate profile of the Company’s interest bearing financial instruments was:

Carrying amount 2011 2010 $ $

Fixed rate instruments

Financial assets 60,000 62,700

Financial liabilities (59,602) (72,461)

398 (9,761)

Variable rate instruments

Financial assets 104,222 116,082

Financial liabilities - -

104,222 116,082

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed interest rate financial assets or liabilities at fair value through profit

or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have no impact on profit or retained

earnings. For the analysis performed on the same basis as at 30 June 2010 there was also no impact. As at

both dates this assumes all other variables remain constant.

(d) Net fair values

The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the Statement

of Financial Position. The Company does not have any unrecognised financial instruments at year end.

(e) Capital management

The Board’s policy is to maintain a strong capital base so as to sustain future development of the Company. The

Board of Directors monitor the return on capital and the level of dividends to shareholders. Capital is represented

by total equity as recorded in the Statement of Financial Position.




(e) Capital management (continued)

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall

not exceed the Distribution Limit.

(i) the Distribution Limit is the greater of:

(a) 20% of the profit or funds of the Franchisee otherwise available for distribution to shareholders in that 12

month period; and

(b) subject to the availability of distributable profits, the Relevant Rate of Return multiplied by the average

level of share capital of the Franchisee over that 12 month period; and

(ii) the Relevant Rate of Return is equal to the weighted average interest rate on 90 day bank bills over that 12

month period plus 5%.

The Board is managing the growth of the business in line with this requirement. There are no other externally

imposed capital requirements, although the nature of the Company is such that amounts will be paid in the form

of charitable donations and sponsorship. Charitable donations and sponsorship paid for the year ended 30 June

2011 can be seen in the Statement of Comprehensive Income.

There were no changes in the Company’s approach to capital management during the year.


Directors’ declaration In accordance with a resolution of the Directors of Tongala & District Financial Services Limited, I state that:

In the opinion of the Directors:

(a) the financial statements and notes of the Company are in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the Company’s financial position as at 30 June 2011 and of their

performance for the year ended on that date; and

(ii) complying with Accounting Standards in Australia, International Financial Reporting Standards and

Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable; and

(c) this declaration has been made after receiving the declarations required to be made to the Directors in

accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2011.

David Blanchard, Director

Signed at Tongala, Victoria on 14 September 2011.


Independent audit report


Independent audit report continued


BSX report Additional information required by the Bendigo Stock Exchange Limited and not shown elsewhere in this report is

as follows. The information is current as at 14 September 2011.

A. Corporate governance statement

The Board guides and monitors the business and affairs on behalf of the shareholders to whom they are

accountable

The Board recognises the importance of a strong corporate governance focus and methodology. The Board is

currently working towards adopting policies and procedures that will govern our Company into the future.

We believe that building policy framework will assist clarify the future direction of our local Company, provide

accountability and transparency and ensure there are guiding principles in place for future decision making.

B. Substantial shareholders - ten largest shareholders

Ordinary shares Number of ord shares

1. Mr Frederick C Birtles 30,000 8.79%

2. Mr Bruce Owen 10,000 2.93%

3. Mr Richard E Thorne 10,000 2.93%

4. Mr Kenneth W & Mrs Frances R Chapman 8,000 2.34%

5. Mrs Lorraine Lister 8,000 2.34%

6. Mr John L McLeod & Mrs Dorothy S R McLeod 8,000 2.34%

7. Mr Gerald F Pauley & Mr Michael J Pauley (Pauley Super Fund) 8,000 2.34%

8. Winpar Holdings Ltd 6,500 1.90%

9. Mr Lance H Tomkins 6,000 1.76%

10. Mr Raymond E & Mrs Lynette M Walsh 6,000 1.76%

100,500 29.44%

C. Voting rights

Each shareholder is entitled one vote, irrespective of the number of shares held.


BSX report continued

D. Distribution of shareholders

The following table shows the number of shareholders, broken into various categories showing the total number

of shares held:

Ordinary shares Number of Number of holders shares

1 - 1,000 202 125,878

1,001 - 5,000 40 109,972

5,001 - 10,000 10 75,500

10,001 - 100,000 1 30,000

100,000 and over 0 0

Total 253 341,350

E. Monitoring of the Board’s performance and communication to shareholders

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the

performance of all Directors is reviewed annually by the chairperson. Director’s whose performance is

unsatisfactory are asked to retire.

The Board and Director’s aims to ensure that shareholders, on behalf of whom they act, are informed of all

information necessary to access the performance of the Directors.

The Board does have an Audit Committee.

F. Annexure 3A

Following the audit of the Company’s accounts a difference has not arisen between the information in the

Company’s Annexure 3A and the information in the financial documents in its annual report

G. Address and telephone number of the office which securities register is kept:

Richmond Sinnott & Delahunty

PO Box 30,

Bendigo VIC 3552

Phone: +61 3 5443 1177

H. Tongala & District Financial Services Limited

David Blanchard

Company Secretary

35 Mangan Street,

Tongala VIC 3621

Phone: (03) 5859 1401

Tongala & District Community Bank® Branch 35 Mangan Street, Tongala VIC 3621 Phone: (03) 5859 1401 Fax: (03) 5859 1407

Franchisee: Tongala & District Financial Services Limited 35 Mangan Street, Tongala VIC 3621 Phone: (03) 5859 1401 Fax: (03) 5859 1407 ABN: 22 094 331 665

www.bendigobank.com.au/tongala Bendigo and Adelaide Bank Limited, The Bendigo Centre, Bendigo VIC 3550 ABN 11 068 049 178. AFSL 237879. (BMPAR11032) (07/11)

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